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Microsoft attacks proposed EU fine

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BRUSSELS, Belgium — In a preview of its promised appeal, Microsoft Corp. accused the European Union on Tuesday of overreaching by including its U.S. business in calculating a record fine of about $615 million for alleged antitrust abuses.

With the EU decision on the software giant due today, trans-Atlantic tensions also began to sizzle as they did the last time the EU took on U.S. corporate giants and blocked General Electric Co.'s planned deal for Honeywell International Inc.

"This ruling is yet another example of the EU assaulting a successful American industry and policies that support our economic growth," said U.S. Sen. Patty Murray, a Democrat from Microsoft's home state of Washington.

Microsoft's chief European lawyer, Horacio Gutierrez, argued that the EU's reported fine appeared to be twice what it should have been under the European Commission's guidelines to account for the company's global operations. Microsoft does about 30 percent of its business in Europe.

"We believe it's unprecedented and inappropriate for the commission to impose a fine on a company's U.S. operations when those operations are already regulated by the U.S. government," Gutierrez said. "The conduct at issue has been permitted by both the U.S. Department of Justice and a U.S. court."

The company also argued it could not have known its behavior would infringe EU law and thus it should not be fined at all.

EU Competition Commissioner Mario Monti "has said clearly the reason he wants a decision is to get a precedent, so clearly there isn't one currently," said Microsoft spokesman Tom Brookes.

Commission spokeswoman Amelia Torres declined to comment, saying Monti would address questions today at a news conference after the Commission adopts the ruling. Sources familiar with the 5-year-old case, speaking on condition of anonymity, say the EU ruling finds Microsoft abused its Windows monopoly, harming consumers and competitors in the markets for digital media and server software.

Microsoft was found guilty of similar monopolistic behavior in the U.S. antitrust case but settled with the Bush administration in late 2001. A U.S. appeals court is currently considering whether that landmark deal was adequate to restore competition.

U.S. companies that do significant business in Europe also are subject to EU law, which authorizes the commission to levy fines for antitrust violations of up to 10 percent of a company's global revenue.

Representatives from the 15 EU governments approved the fine Monday. A source familiar with the case, speaking on condition of not being identified, said Tuesday it was around 500 million euros ($615 million).

That would be a record for the EU in an antitrust case but far below the maximum of around $3.5 billion that could be imposed in Microsoft's case.

Given that the company, based in Redmond, Wash., has cash reserves of nearly $53 billion, experts say the fine is less significant than the changes Monti is seeking in how Microsoft sells Windows, which runs most personal computers worldwide.

The EU is expected to order Microsoft to release more of the underlying Windows code to rivals in the server market, and deliver a version of Windows without its Windows Media Player software in Europe to help competing products reach desktops.

Antitrust lawyers call Microsoft's latest arguments unsurprising.

"It's unprecedented but not necessarily wrong," said Martin Baker, chief antitrust partner at Taylor Wessing in London. He noted the U.S. case focused largely on Internet browsers, while the EU case deals with media and server software.

"The absence of a precedent can be a mitigating factor," he added. "But the bundling of Media Player and the leveraging of market power from operating systems into servers, that's not rocket science. Those are well tried and tested principles."